Ontario’s phony war against druggists

TheStar.com – Opinion
Published On Tue . By Thomas Walkom, National Affairs Columnist

The Ontario government’s much-ballyhooed fight with pharmacies is a sideshow. Queen’s Park will save some money by outlawing the practice of so-called professional allowances. But the real cost drivers in health spending are the big multinational firms that make pharmaceuticals, not the druggists who sell them.

Across the globe, drugs represent the fastest growing element of health-care costs. In part, that’s because some drugs are remarkably useful. But in part it’s because the handful of firms that create new drugs, protected in most of the world by robust patent laws, are able to sell at near-monopoly prices.

For decades, Canadian governments have been trying to sort out the politics around drugs. In 1969, a federal Liberal government opened the door to cheaper drugs by allowing new, home-grown, generic companies to literally copy brand name pharmaceuticals and sell them at discount prices.

But the brand name drug firms, many of which had establishments in Quebec, fought back — threatening to close plants in Canada unless Ottawa strengthened their patent monopolies. Eventually a Conservative federal government did just that.

Meanwhile, provinces like Ontario, under pressure from their citizenry to provide free or subsidized drugs, were caught in the middle.

Ontario saw the costs of its Drug Benefit Program for the sick and elderly increasing at double-digit rates.

Which is why, four years ago, then health minister George Smitherman came up with an ambitious plan to curb these increases, one that took aim at brand name multinationals, generic manufacturers and the pharmacies that sell drugs.

That plan largely collapsed when the big multinationals, sometimes known as Big Pharma, threatened to close down their operations in the province.

Now Matthews is rejigging those parts of the Smitherman plan that don’t affect Big Pharma.

In themselves, the elements of the Matthews scheme seem reasonable. Professional allowances — product placement bonuses paid to pharmacies by generic manufacturers — have careered out of control. The government hopes to make net savings of $500 million annually by ending this practice and, instead, pay pharmacists directly to provide advice to patients.

Similarly, the move to clamp down on the prices charged by generic drug firms makes sense. Copycat drugs cost significantly more in Canada than they do in the U.S., in part because the small number of generic firms here have adopted their own quasi-monopolistic practices.

But Matthews is studiously ignoring the proverbial elephant in the room. In all of the government’s recent announcements, there is no mention of Big Pharma.

There should be. Brand name pharmaceuticals account for about 73 per cent of the roughly $4 billion spent each year by Queen’s Park on its drug programs.

In its latest annual report, the federal Patented Medicine Prices Review Board found that brand name pharmaceuticals cost 15 to 25 per cent more in Canada than they do in France, Italy, Sweden, Switzerland and Britain.

In Ontario, thanks in part to Smitherman’s decision to have the Ontario Drug Benefit Program negotiate volume discounts with the multinationals, the rate of growth of brand name drug costs has slowed in the past four years.

But a 2009 paper produced by Ontario’s health ministry shows that brand name firms still earn a whopping 25 per cent profit rate from selling drugs in this province.

Which, for a government interested in saving money, should be an incentive to broaden its focus. There is more to drugs than druggists.